MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. OVERVIEW OF THE ECONOMY

As per the revised estimates for GDP data released by Central Statistical Office (CSO), the GDP is to grow at 7.4% in 2014­15 as against 6.9% in 2013-14 and 5.1% in 2012-13. While the industry and services sector are estimated to grow at a higher rate in 2014-15 than that in 2013-14, the agriculture sector was also affected adversely by shortfall and unseasonal rains.

The economy of India in the FY 2014-15 has emerged as one of the largest economies with a promising economic outlook on the back of controlled inflation, rise in domestic demand, increase in investments, decline in oil prices and reforms among others. More benefit to the Country is that it has got stable Government with good support at Central level after long.

The average Wholesale Price Index (WPI) inflation declined in 2014-15 to 3.4% (April-December), vis-a-vis 8.9% in 2013­14, as fuel has witnessed a sharp decline in prices. Food price inflation also moderated to 4.8% during April-December 2014 as compared to 9.4% in 2013-14.

Further average retail inflation, measured by Consumer Price Index (CPI), moderated to 6.3% in 2014-15 (April-December) from 9.5% in 2013-14.

As per Global Economic Prospects Report, the global economy is expected to grow 2.8 percent in 2015, slightly less than forecast. Developing country growth, buffeted by falling commodity prices, the stronger dollar, and tightening financial conditions, has been revised downward to 4.4% in 2015 but is expected to pick up momentum and reach 5.3% in 2016-17.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

LAMINATE PRODUCTS

Laminate products generally used as furniture surface materials or wall paneling and it protect them from scratching, wear and tear and fire risk. Decorative laminates usually increase the life span of surfaces and give them an attractive finish. In addition, decorative laminates are available in wide range of colors, designs and textures are other major factors driving the value of decorative laminates. Decorative laminates are basically of three types: high-brssure laminates, low-brssure laminates and edge banding. High-brssure laminates are high-priced and more durable, whereas low-brssure laminates are low-cost. Edge banding is generally used to smooth the exposed edges of surfaces include MDF and plywood. The basic raw materials required for manufacturing of decorative laminates include kraft paper, tissue paper, base paper, melamine, methanol, phenol and formaldehyde.

As per latest estimates, India has now more than 165 laminate producing establishments that includes all kinds of laminate. As per BSMR finding during 2013-14, India has around 135 'Decorative' Laminate producing units of which around 7-8 units are non-operational. It is observed that there has been a total production of 1.35 to 1.40 Crore sheets every month in India i.e. approximately 13.5 million sheets per month that includes export and domestic market. Indian laminate industry and trade is estimated to be of Rs. 4800 Crores per annum in India. By 2015 it is expected to touch Rs. 5100 Crores depending on the performance in remaining months.

The HPL production capacity has been growing year on year. In terms of number of sheets, the production has seen a growth of 12% approximately since 2010. As per the reports and estimate of various furniture industries, the online market is reported to be approaching a minuscule Rs. 800 crores but it is growing rapidly. Experts are of the view that in the next 3-4 years furniture sales online will be touching Rs. 15,000 Crore.

MEDIUM DENSITY FIBRE (MDF) BOARD

Medium-density fibre board (MDF) is an engineered wood product formed by breaking down softwood into wood fibres, often in a defibrator, combining it with wax and resin, and forming panels by applying high temperature and brssure. It is a building material similar in application to plywood but made up of separated fibres, not wood veneers. It is denser than normal particleboard.

Large-scale production of MDF began in the 1980s. Its name derives from the distinction in densities of fibreboard. MDF typically has a density of 600-800 kg/m3, in contrast to particle board (160-450 kg/m3) and to high-density fiberboard (500-1450 kg/m3). Similar manufacturing processes are used in making all types of fiberboard.

The MDF segment will be less crowded as there is no imminent capacity addition and is expected to be one of the most glorious years with respect to demand and profitability. With rise in widening applications of MDF in housing and interiors, MDF is well positioned to enjoy lot of value addition on its surface. The MDF segment is growing around 25% rate per annum and will generate further demand and maintain the growth during 2015.

In 2014, global wood-based panel production reached 288 million m3, which was a 3.6% increase over the brvious year (278 million m3). This is mostly due to rapid and consistent growth in the Asia-Pacific region, where production has increased by 31% in last 6 years. (Sources: FAO) The global outlook of MDF for 2015 calls for an increase of 3.8 million m3. This will bring the global total to 83.8 million m3 and, subsequently, it is on track to reach 87.4 million m3 by 2017.

OPPORTUNITIES AND THREATS

OPPORTUNITIES

• Good Brand Image: Company has good brand image and quality product in the Indian as well as foreign market. Company's products are known in the market with brands which have the "VIR" as brfix and Signor Brand.

• Wide product range: Company has around 1200 designs in laminated sheet which gives it unmatched competitive superiority over its competitors. Company remains eager in providing latest designs and products to its customers. During the last year, Company lodged various Catalogues of its Laminate Product i.e. VIR Primelam Catalogue of 0.8 mm Sheets, VIR Laminate Master Catalogue of 1.00 mm Sheets, 0.8 mm Signor Catalogue, Signor Master Catalogue of 1.00 mm Sheets, VIR Digital Catalogue, VIR Architectural Catalogue, VIR New Arrived Catalogue etc. It shows quickness of the company to attract new customer and provide something new to its existing customers.

• Online Selling: As per experts view the next 3-4 years furniture sales online will be touching to Rs. 15,000 Crore. The company will take effective steps to take benefit of this opportunity.

• Expand Market Network: Your Company continues to expand its marketing networks, by appointing Consignment Agent, branches, distributors, dealers etc. in various states in all over the country.

• MDF Growth: The experts expected that the MDF segment may grow at rate of 25% during the year 2015-16, the company may take reasonable steps to take benefit of this opportunity and further day by day, MDF is taking place of Plywood in Furniture Industry. People are accepting MDF as substitute of Plywood. Presently, there are few players in India of MDF Board manufacturer. So, future of MDF Board is very prospective in India.

• Government: After the long time government is changed and we might have got stable government which has more focus on the development side and improving environment conditions of countries, it may lead to growth in infrastructure and real estate sector i.e. road, bridge, hospitals, Housing, Hotels, Commercial Properties etc,. The growth in this sector will lead to the growth of Companies which are connected with Interior Infrastructure items.

• Housing for All: It is the big mission of Central Government that by 2020, every Indian family should have a house of its own. Imagine, what may be effect of this mission on the demand of housing related industries including furniture.

THREATS

• High Competition Era: The laminate Industry has entered into the orbit of the high competition. The market fights are set to intensify with unstoppable capacity build up. The Competition from both unorganized and other organized players, leading to difficulties in improving market share.

• Manpower: The one of the common problem is emerge for finding talent with competence or even skilled manpower for the wood based panel industries irrespective of the company Brand or Size.

• Raw Material: The wood based panel industries is dependent on natural forests for their raw material requirement, it is crisis in view of the restrictions on timber extraction owing to environmental considerations.

• Under cutting of price: Due to high competitions in market, the competitors are doing price cutting of products to compete or keep their existence in markets which is ultimate big problems for the industries.

• Importation: Dumping or Cheap import from China and other Countries of laminates, MDF and other furniture products.

• New Entrance: More and more new organized players are entering into market which will increase competition in organized sector also.

• Threat of substitute products move toward market.

3. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

LAMINATES & ALLIED PRODUCTS:

Even high competition in the Laminate segment, the company is performed well by executing plans, markets strategy, introducing new designs and finishes or textures, improving quality of product with reasonable price etc. The company is also focusing to capture rural market along with urban market. The turnover of Laminate segment was up from Rs. 155.58 Crores in 2013-14 to Rs. 158.85 Crores in 2014-15 increase by Rs. 3.27 Crores

MEDIUM DENSITY FIBER BOARD:

In the MDF Segment, Company performance was very well in the year 2014-15 compare to the last year 2013-14 by increasing its markets share. The turnover of MDF product was increased from Rs. 78.06 Crores in 2013-14 to Rs. 102.67 Crores in 2014-15, showing growth of 31.53%. Our company's performance was in line with the industries performance in the MDF segment, the Indian penal Board industries growing at the rate of 25% as per the estimate made by the industries experts and our company's MDF segment grown at the rate of 31.53% in the year 2014-15 compare to the last year 2013-14.

4. OUTLOOK:

After the long time Central Government is changed and we might have got stable government which has more focus on the development side and improving environment conditions of countries, which may lead to growth in infrastructure and real estate sector i.e. road, bridge, hospitals, Housing, Hotels, Commercial Properties etc,. The growth in this sector will lead to the growth of Companies which are connected with Interior Infrastructure items.

Further the Reserve Bank of India has already eased the monetary cycle and is expected to bring out more interest rate cuts going forward. The multinationals that were hesitant to enter in the Indian markets are ready to lay their hand on the arising opportunity the new government is creating. Inflation including the house price components has now been reduced to the lowest level in the recallable history. Property buyers are back in the most cities as enquiries have rebounded.

All this favorable factors coupled with some of the important developmental reforms that are being pursued by the Central Government like the tax, reform and push for infrastructure spending will set the stage for further pick-up in economic activity in 2015-16. This may provide the favorable platform to Laminate and Penal Board industries.

The Company's outlook for the year 2015-16 is to add more products in the product range as per requirement in the market. Our company go forward as per the market trend and satisfy the market demand by implementing various plans, markets strategy, introducing new designs and finishes or textures, improving quality of product with reasonable price etc. and may also increase production capacity by making capital investment, if required to satisfy the markets demand.

5. RISKS AND CONCERNS:

In every business, there have some Risks. Likewise our company is also exposed to the normal industry risk factors of interest rate volatility, economic cycle, Credit Risk, Asset Risks (natural calamity etc.), Human Resource Risks, Foreign Exchange Fluctuation Risk, Government Policy Change Risk, IT Risks, Transportation Risks, Competition Risks, Raw Material Availability Risks.

Your Company has formed a robust Risk Management policy to mitigate above mentioned Risks. The Company through a Steering Committee oversees the Risk Management process including risk identification, impact assessment, effective implementation of the mitigation plans and risk reporting.

Further Company has also constituted a Risk Management Committee of the Board of Directors of Company to oversee the Risk management efforts in the Company.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has an adequate Internal Controls system aimed at achieving efficiency in operations, optimum utilization of resources and compliance with all applicable laws and regulations. Your company has internal control Department which carried following activities on regular basis.

• Reviewing accounting system and related controls

• Examining management of financial and operating information

• Examining the economy, efficiency, effectiveness and proprietary of operations

• Identifying the risks in relation to key business processes and verify whether an effective control exists to mitigate these risks

• Suggesting measures for optimizing the Business Process Controls.

• Reviewing adherence to corporate policies.

• To examine and audit the areas in consultation with the management and to report on critical issues

The internal controls Department headed by Internal Auditor of the company. The Company's internal control system is designed to ensure management efficiency, measurability and verifiability, reliability of accounting and management information, compliance with all applicable laws and regulations, and the protection of the Company's assets and so that the main company risks (operational, compliance-related, economic and financial) are properly identified and managed over time. The Board of Directors, responsible for the internal control system, sets the guidelines, verifying its adequacy, effectiveness and application.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Net revenue from operations increased to Rs. 27565.59 lacs as against Rs. 25567.23 lacs in the brvious year showing a growth of 7.82%.

The Profit Before Extra-Ordinary Items & Tax for the current year is Rs. 942.55 lacs as against Rs. 652.96 lacs in the brvious year showing a growth of 44.35%. However, Profit before tax for the current year is Rs. 340.64 lacs which was Rs. 652.96 lacs in the brvious year, Profit before tax in the current year compared to brvious year is gone down by Rs. 312.32 lacs. The reason for going down the Profit before tax is because of the company sold sizable fixed assets of its Navalgadh Unit in current year resulted in loss of Rs. 601.91 lacs. The said loss is reflected under the extraordinary item in the statement of Profit & Loss.

After deduction of Tax, there is a loss in the current year of Rs. 64.54 lacs as against Rs. 301.65 lacs profit in the brvious year. The PAT of current year was affected mainly due to the loss in sale of fixed assets of its Navalgadh Unit as mentioned above.

There are no material changes and commitments affecting the financial position of your Company which have occurred between the end of the financial year 2014-15 and the date of this Report.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company always recognizes the importance of manpower. Company promotes employees to attend outside seminars or programs related to their fields and motivational which encourage them to make contribution toward company, family and nation at large. Company also encourages to the employees to offer their creative suggestions for development in their respective areas which are thoroughly discussed in periodical meetings. The company enjoyed excellent relationship with workers and staff during the last year

As on March 31, 2015 the company has 426 employees at its manufacturing plants and administrative office. The Company has been maintaining cordial and healthy Industrial Relations, which has helped to a great extent in achieving the upper growth.

CAUTION STATEMENT:

Statements made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.